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Mad Money

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Masco 26, Calvin Klein 13, Cramer 11, Goldman 11, Us 10, Citi 5, Jim 4, Goldman Sachs 3, Tommy Hilfiger 3, U.s. 3, Sirius 3, Tweeter 3, Autozone 3, Victoria 2, California 2, Washington 2, Ann Taylor 2, Lowe 2, Asia 2, North America 2,
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  CNBC    Mad Money    News/Business.  (2013) New.  

    December 9, 2013
    6:00 - 7:01pm EST  

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to the dollar. for me to go to 125 or 150 seems like a bounce. >> all right. long loony, long pound. thanks so much for watching. "mad money" starts right now. my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere. and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money," welcome to cramerica. my job is not just to educate but also to teach you. so call me at 1-800-743-cnbc. to most private investors, the bad news is good news for stock story doesn't pass the smell test.
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saw that tweet this morning at 4:30 on the day where the dow gained 30 points and nasdaq advanced .15%. and it's always been like this. and the tweeter came back, so investing in stocks is bedding on the fed? is that why small investors always get in at the top? in other words, this guy just doesn't think the move is right. i think that the word right has to be the most expensive word in the english language. this is not an ethics class, people. it's not an exercise in some bizarre form of justice. it's not right or wrong! what seems obvious to me and incomprehensible to others. i sound like someone who wants to get away with something, while those who think it's not right somehow represent the true path of reason. how the heck did this happen? how could so many people feel like @paulkingsley?
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i think it's central to finding out the next leg of this market. it holds the key if stocks can rally higher. and i know they're elevated. so, first of all, there is no smell test. when you invest in stocks, you're trying to divide in the direction the market will take. that requires lots of history, lots of pattern recognition and lots of homework. some people like technicians often think that pattern recognition is all that matters. others believe the whole exercise is wrong and they view stocks entirely as one asset class that's done well over time so you need exposure to it. but still others, myself include like the pattern recognition and the quality of the asset class and believe if you find out the best of breed stocks and invest in them, then the class can be discovered and exploited for profit. notice, nowhere within the true reason to own stocks is a smell test. when you're betting on what you're betting on here. what you're betting on is when you invest during these bad news is good news moments is the
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history leading up to when the economy flips into high gear and good news becomes actual good news. every time we've ever been in this situation before, it's been an explosive time for the market. and you had to invest during the bad news is good news phase in order to reap the biggest gains. in other words, you have to be early and you have to anticipate. if you wait for the market to smell good as the tweeter i mentioned once, then you'll likely miss a great deal of the move. hey, that's how retail comes out. too late. now here's where a lot of judgment gets clouded. there are plenty of people who believe that the federal reserve is life support for the stock market. and when you take away that life support, what happens? the market dies. these people simply do not know the history of the market as encompassed by my admonitions by don't fight the fed.
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thanks to the polarizing world, now affects even the process of trying to make money in stocks. i think it's a totally false linkage. those who avoided this rally because they believe that it is somehow politically incorrect as the tweeter alluded to missed out on making tons of money. i also think they don't care, though. that's because these people are not really investors. they're politicians masquerading as investors. their views have to be avoided at all costs because they have nothing to do with the actual process of trying to make money. they act as this tweeter did, as if they're protecting the small investor from people like me and otherwise if they're not careful and i keep doing what i'm doing, the investor will come in ultimately at the top. i say tons of small investors watch this show every day. and they've been reaping terrific gains. lay off them. i read their tweets @jimcramer. you can, you'll see. stop bad mouthing people trying to make money because many of them are succeeding. their laughing all the way to
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the bank. second, those who think the stock market can never transition to an earnings drive advance don't understand the idea of sector rotation. when they say this market, they're simply being brainwashed by trading the futures of the market like that risk on, risk off stuff i was able to kill. yeah. that is not investing. that risk on, risk off asset classes. that's not investing. that's rolling them. we don't roll them! asset class choosing, it's been dead wrong. the dominant asset class success story of my lifetime has been in the fixed income world, not stocks, the 30-year treasury offering by far the best risk/reward over my career. that's right. 30-year treasury has been fabulous. you know the most predictable element of the market comes when the earnings aren't manufactured by cost cuts but are generated by higher sales overlaid on an organization with big shares taken out by stock buybacks. that's where we are now.
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we're getting many signs that the international companies now experiencing the transition from earnings oriented investing, something bountiful, to sales oriented investing. when that occurs, the market can gallop. there are plenty of people betting the fed will hold off on tapering. those are what i call the clorox investors, attracted to slight growth with yield. there are so many hedge funds betting against the securities like clorox that there's this bizarre funnel effect. longs unwilling to sell because of gains and a nice dividend and outright share buybacks. there were 153 million shares of clorox a little more than five years ago. now only about 132 million. that missing 21 million shares explains much of the move. much more than people realize. makes for hard short selling and easy owning. now, it is true that we could lose clorox in the transition to higher earnings. anyone who knows the history knows we should now be shifting to the banks, the bank, the financial part of the market is the largest and the banks make
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up the large part of the financials. the money should come out of the nonbank financials as well as when the rest of the market flow into the banks. the government keeps them from doing so, but it could happen soon. these investors might be drawn to technology, especially now that the personal computer class of tech seems to have bottomed. at least we can see that from microsoft, hewlett-packard and intel. and they might be interested in retail recognizing things can get better than they are right now. only because of the possibility of more jobs, therefore more disposable income, and sales numbers out there than the ones we get to see because they're with the big boxes typically and not the omni channels. the political types are citing the new health care regime as a reason to sell stocks. they might prove to be wrong. the large companies are precisely the ones that can navigate these new waters. smaller capitalization and smaller company rivals will fall by the wayside under this new health care system. that will soon be -- soon be logical to everyone.
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and it's seeing if the people in the white house had some business savvy, they, too, would've seen this coming. they didn't see it more than the website issues. so to sum up, the smell test does get vindicated by a transition that historically occurred in the cycle. the investing that has come before this moment is from people who recognize that bad news has historically led to good news and they've been driven by individual stock performances as well as pattern recognition. the asset class hunters and corporate buybacks have been convenient props to the whole process which is why this move's so explosive. the rally that shouldn't be happening is, indeed, prevailing. i feel bad for people who want to wait for the smell to improve. they might be confused by politics in the media politically driven need to have a balanced debate between bulls and bears. wow, the bulls and the bears are going at it again. but in the end, these are people who convince themselves they were right. and doing so they were perfectly willing to forego the incredible gains to date. and i think they'll most likely
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forego the next gains too. they've been brainwashed into thinking it's all phony. here's the bottom line, though. a combination of blindness instilled by the inability to see that stocks can really rally under president obama coupled with an underestimate of the federal reserve's will, historical buyers who are not now going to turn sellers because they know the history and fear of stock shortage among seasoned equities could end propelling us to the next level. believe me, to these purists, the next move, it'll stink to high heaven too. can i go to gerard in south carolina? gerard? come on, this is the real usc. >> caller: hi, jim. >> how are you, gerard? >> caller: i'm well, thank you, sir. about a month ago, caller asked about noodles, you recommended to hold it. i have a fairly large position. i am down about 11%. friday when the market was up,
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the stock tumbled 6%. my question to you is this, jim. they are coming out with a new offering at a cost of $39.50. now, my cost basis is higher than that. and i was wondering going forward, generally speaking when you see this happening within a stock that you own at the repurchase -- new offering price will be less than what your cost basis is, is that a sign to sell? >> i didn't think they should have done that deal. the stock had been down because of the big colorado flood. 39.50, you know, to me come you come underneath that now you get a better basis. stock goes back to 41, sell a little, but you have to buy some here. you cannot sell it here, gerard, and they haven't have done that secondary. i wish they had not done that, but they did it. and it was negative for shareholders. bill in missouri, bill? bill?
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>> caller: yeah. hi, jill, how are you doing? >> real good, bill, how about you? >> caller: i'm doing great. okay. my question for you is i noticed recently that autozone had been downgraded. and i own quite a few shares of o'reilly automotive. i'm wondering if i should be concerned about it. do you think that'll affect -- >> no, i like o'reilly more. but remember, autozone reports tomorrow. and the pattern has been autozone gets completely hit right after the report and then you have to -- >> buy, buy, buy -- >> so don't worry about o'reilly's really good. the roses, they -- you can stop and smell them. if you wait until the market smells right, though, you might miss the big move. and that's one of the truths of investing. but we'll get through it together. stay with cramer. coming up -- fashionable financials? tommy hilfiger, izod, the bevy of brands from pvh given an
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unprecedented look at the consumer. the earnings are out and cramer's got first track to hear what these numbers may mean for the holiday season ahead. and later, neighborhood watch, housing is back. and that's meant boom times for many of the brands you find around your home. but does the rebound in real estate make these household names a buy? or has the comeback opened another door to invest? plus -- instant gratification? do you swipe for points, money or miles? millions of consumers use reward programs when they fill up, fly or grab the latest fashion. and alliance data is behind the transaction. can the stocks still provide a bonus after the rally this year? find out in cramer's exclusive. all coming up on "mad money." don't miss a second of "mad money." follow @jimcramer on twitter. have a question, tweet
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cramer, #madtweets. send jim an e-mail to madmoney@cnbc.com. or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com. ya know, with new fedex one rate you can fill that box and pay one flat rate. i didn't know the coal thing was real. it's very real... david rivera. rivera, david. [ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. where does the united states get most of its energy? is it africa? the middle east? canada? or the u.s.? the answer is... the u.s.
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we've been in a really choppy moment for retail, especially apparel. so how is hpv, company you know as calvin klein, holding up in this environment? king of the dress shirts in department stores all over north america. back in february, pvh bought warnaco, bringing calvin klein jeans and underwear back under the same umbrella as the rest of the brand. pvh reported the close. and while the revenues came in a bit light, they delivered a 5-cent earnings beat. rather that raising it. maybe they're trying to be conservative. let's take a closer look, hear more about the quarter and where the company's headed. manny, welcome back to "mad money." >> nice to see you again, jim.
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>> are these the calvin klein jeans we're worried about? >> yeah. >> are these the ones we want to see because you're abject in the conference call -- in the statement that you're unhappy with calvin klein jeans in the sales. >> yeah, that business has been under pressure from before we acquired the company. we've been consistent. we talked about the second half of 2014 where we really think we'll start to see the turn around associated with the cleanup of sales distribution and also really focusing on new product. >> you use these -- do you use the two terms i'm getting used to and don't want to be. very competitive and highly promotional. that to me says i understand why the stock's trading down in after hours. manny is saying, who is so confident is saying, look, this is not that kind of holiday season. >> well, look, it's -- we've gotten off to a reasonably good start in november, but the environment is very promotional right now. and that's what we're seeing pretty consistently at the mall level, department stores, also in our own retail stores. so we're taking right now a cautious look as we look into
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the fourth quarter. we'll watch the next three or four weeks. and i think we're in as good a position as anyone to outperform. but right now, we're being cautious. >> well, i feel like i've got to divide between a business that's really on fire, which is tommy hilfiger and a business i think you still sound unhappy with which is this acquisition. if i look at tommy hilfiger and look at legacy, you have to be thrilled it's hanging in there so well. >> well, i think so. based on the performance year-to-date, we've had a terrific year. and the big outperformance was the calvin klein business. we have a problem in jeans. >> right. >> jeans is a big business, but the calvin klein brand is an $8 billion business, jeans is about, you know, 15% of that. clearly the other 85% is putting up big increases across the board. >> this surprised me. you talk about having -- you're not happy with the quality and the design of the jeans. can't you just get new people?
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you often -- you also say you're trying to fill a significant number of open positions. what's happening? >> well, look, when we pay quire the business, we talked about it, the need to invest in the business, both from a product point of view, design point of view. we thought the business was not run appropriately, particularly at the jeans level for calvin klein. we're making those -- we've made those changes. everybody would like to happen overnight, but i think you understand, you've been in the business -- lead times in this business are eight to nine months out. so we think we'll have an impact on spring '14. but we really think the big impact will be for fall '14. plus, presentation at retail. we need to make those investmen investments. and that's what we're in the process of doing. >> well, help us through the idea that something's promotional. well, why can't macy's be promoting your stuff and comes right to your bottom line. why is promotion necessarily bad for the guy who is being
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promoted? >> well, i think a promotion overall is the question of the average unit retail out the door. we're talking about -- the goods are moving, we can't have any kind of inventory problem. we've had a strong third quarter, what we're talking about is how promotional is the holiday season going to be? how much support do we give to our retail partners? what kind of markdown rates in our own stores? the initial indications with this tighter holiday season, less calendar days, it just feels like it's going to be coming later and later at this point. >> how about this november jc penney number up 10%. jc penney previous guys became good partners with you. using legacy. that's been good, right? >> very strong for us. the izod business continues to be strong. and what we saw is -- i think i've been on there a couple of times. i've been critical about the lack of classification inventory product like dress shirts and basic sportswear. what jc penney is known for. those inventories really got back in line in the third
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quarter. and you started to see that sell through improve in october, dramatically improve in november. and i believe those trends continued going into december. >> calvin klein europe jeans, how much the design and the quality, how much the fact that southern rim still not really turning for you, but northern pretty good. >> yeah, i guess different from the tommy business where we're 75% in northern central europe. the calvin business is really just very much 75% to 80% southern european business. spain and italy continue to be challenged markets. and as we've talked about our european business overall in calvin klein is about a $500 billion business, and we're breaking even in that business. our tommy business which is three times that size earns close to 15%. just to give you a sense of what we think the opportunity is for the brand and how we're going. it's the investments in order to
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get that business right. but in saying all that, we still beat the quarter by 5 cents a share. >> i know stocks down and i'm going to tell people, look, if it's a 2014 story and over and over again you say it's a 2014 story, i'm not going to say it's a 2013 story. because that means i'm not listening to you. i'm not even including what could go on in asia. you're so forthright about what's not working and you're not that -- and you're totally humble about what is working. seems to have worked. >> yeah, particularly calvin klein, jeans, underwear business and our sportswear businesses throughout asia. china in particular and in southeast asia. those are real growth areas for us as we go forward. >> well, that's what i want to focus on. give us more bright spots. i think the stock is going to come down. >> another big bright spot for calvin klein continues to be latin america. and anything in north america with the exception of jeans. our calvin business overall is up about 8%.
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that's what our jeans business down double digits. just to put that in perspective, our other businesses are women's businesses, sportswear businesses are up double digits. that trend continues, the business is coming together, the investments we're making. people, product, we think looking out second half of '14, '15, we think they pay big dividends going forward. this is a story about taking a big acquisition, right sizing it. fixing it -- >> no regrets. >> no regrets at all. >> and it could be more in the same name plate. more calvin klein out there. >> absolutely. double-digit growth in this calvin klein business going forward. >> well, i'm a believer. made me a believer before, i'm a believer now. >> you'll see the stock come off because it didn't do xyz, think about next year, think about it as you would any company that is in -- that is saying, look, next year's going to be better that has made you money year after year after year. and that's why you shouldn't be selling pvh, you should be buying.
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stay with cramer. coming up -- cramer's got another read on retail. whether you're buying pumps or pumping gas, more consumers are hooked on rewards programs than ever. find out if these benefits could provide you a bonus. and just ahead -- the rebound in housing has caused a rally in everything, including the kitchen sink. is that where you should be looking next? all coming up on "mad money." it's estimated that 30% of the traffic in a city
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is caused by people looking for parking. that's remarkable that so much energy is, is wasted. streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years, we wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then there's a mesh network that takes this information sends it over the internet so you can go find exactly where those open parking spots are. the collaboration with citi was important for providing us the necessary financing; allow this small start-up to go provide a service to municipalities. citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally, citi is there every step of the way. so the end result is you reduce congestion, you reduce pollution and you provide a service to merchants,
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and that certainly is huge. losing thrusters. i need more power. give me more power! [ mainframe ] located. ge deep-sea fuel technology. a 50,000-pound, ingeniously wired machine that optimizes raw data to help safely discover and maximize resources in extreme conditions. our current situation seems rather extreme. why can't we maximize our... ready. ♪ brilliant. let's get out of here. warp speed. ♪
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who should you trust? one of the toughest things about the market is for any p given stock, you can typically find very smart people on both sides. you have brilliant bulls, hyper intelligent bears all saying contradictory things about the same exact company. take today, just this morning, goldman sachs came out with a sprawling report on the building products plays. totally high-quality research where among other things they initiated coverage on masco, maker of paints, plumbing cabinets, installation. and credit suisse comes out with a little note reiterating the -- buy, buy, buy on the same stock.
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sister, mother, sister -- who's right? the bears at goldman, smart. the bulls -- the bulls at credit suisse, all right, little spoiler alert here, everybody. my charitable trust owns masco, so guess what conclusion i'm going to reach? but, anyway, because you're going to have to sort through conflicting opinions to decide whether or not to buy a stock, i want to go through the negative research by goldman sachs. it was high quality, shows you why i think the bulls are right, i hope. first, though, a little background on this company called masco. one of the leading players in home building products with iconic brands including delta faucets, craft made cabinets, bear paint among many others. 70% of the sales come from the united states, most of the remaining comes from europe. small but not insignificant 4% yield and up 29% year-to-date and that's not too shabby.
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if you think housing will stay strong, something that's totally believable after this terrific october new home sales numbers we got last week, then masco is an excellent way to play it. if toll says good things tomorrow, masco going higher. why does goldman sachs say it's a sell then? first of all, the goldman piece is not just about masco. it's about the whole building products cohort. and their main thrust is that nonresidential construction is starting to heat up. you want to swap out of the residentially focused plays like masco and swap into names with a lot of nonresidential exposure like arm strong world, the flooring and ceiling play and mohawk industries, the flooring play, both of which have spiked nicely today off this report. i think goldman makes a really compelling case for nonresidential construction. i agree with that, that doesn't necessarily mean you should sell things that are housing related. i think they're wrong about that, wrong about masco. meanwhile, the credit suisse
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note was to tell people they like masco. but the firm's last report from the end of october made a bullish case for the stock. while the masco bears at goldman believe that housing will keep accelerating next year, they think it might not pick up until spring. that's a gap. more important, they think masco's installation business where they sell insulation, gutters, fireplaces, garage doors, roofing, they think that could be damaged because of the slowdown in housing over the summer as there tends to be a one to two-quarter lag between when new homes are sold and things like masco's insulation get installed. i get where goldman's coming from here. the fact is, this part of business accounts for 16%, 1-6 of masco sales. the company actually gets 73% of the sales from the repair/remodelling market which should stay strong for a time to come. remember, the rise in home values means that people are much more likely to renovate
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homeowners who aren't under water in their mortgages spend three times as much money on their houses as those who are under water. thank you for home depot for giving me that statistic. they do try to throw some cold water on it. saying the repair/remodel is close to the historical average as a percentage of gross domestic product. i think that's the wrong way to look at it, mr. goldman and mr. sachs. as the job situation gets better, so will the home improvement market. spending is still 14% off the 2007 peak. next up, goldman doesn't like how masco gets 40% of the sales from home depot and lowe's. they think this concentration limits the country's margin expansion. those are powerful vendors. especially with the increasing consolidation in space. you know what, i think that's slightly misguided. masco has exclusive agreements with both companies representing
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huge sales platforms. they're as crucial to driving revenue growth. that's right. and might not be as limiting for the company's margins as goldman thinks. i like home depot and lowe's said they're seeing a pick-up in bath. they're willing to pay up for better brands and higher quality products which is also good news for masco. the bears at goldman think we could be disappointed by the margins of masco's cabinet business. and 30% of the sales and a lot of the growth come from the lower margin direct to builder market which is so nonlucrative the competitor fortune brands, another stock we like, has gotten out of that distribution channel entirely in certain regions. i think it's worth mentioning that masco's management has taken out in costs since 2006. the latter of which they've restructured pretty dramatically. the company's margins are now on the rebound although there's room for improvement. vying for 30% of incremental
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margins. but it's been conservative since the housing bubble burst, i wouldn't be surprised if masco saw incremental margins in excess of 40%. with more on the way in 2014, on top of that credit sweiss thinks they can boost margins by raising prices. and i've got to agree, i think they've got pricing power as goldman thinks it doesn't. goldman says masco won't be able to return capital aggressively to shareholders because they're cleaning up the balance sheet. on the other hand, masco does have $1.2 billion in cash right now and should generate $1.5 billion in free cash flow from 2013 to 2014. no, i don't expect massive buybacks any time soon, but i wouldn't be surprised to see them returning loads of cash to shareholders. got to buy now for then. during the last upcycle, they were shareholder friendly, bought back 43% of the flow. enough about masco the company, how about the stock? goldman gives it a $20.50 price
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target. $1 below where the stock is now. ouch. they get there by assigning the company an enterprise multiple, the enterprise value, the market cap plus the debt minus the cash divided by the earnings before interest, taxes, depreciation, amortization of 9.8. credit sweiuisse. the stock still has plenty of room to run. if that's how you want to value it. meantime, trading at 19 times next year's earnings, which is well below the five and ten-year averages and not too pricey considering it should be able to grow earnings at a 40% clip. the bears at goldman think it's time to sell masco and swap with nonresidential construction plays as the space starts to turn. i think they're wrong. i think they're wrong to write off masco and i agree with the bulls and believing this stock could have more room to run.
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i say stick with masco and stick with cramer. lou in oregon, lou? >> caller: boo-yah, skedaddy. >> i'm not booing, i'm louing. >> caller: hey, about six months ago you, recommended and i bought two stocks, american realty capital properties and also health care reit. i'm wondering, should i by more? >> i would. look, these are all about -- this group has been killed because of rates going higher. and when we get the ten-year at 3%, which i think it's going to, that's when i want you to buy. not then. these are under huge pressure because of the backup in treasury rates. i understand that's what it is. not because of the fundamentals, they're good. 7% yields is always good to get. two companies with competing -- when you have a stock with two views on it, okay, you've got to figure out which the one is the best. i know credit suisse likes masco. i think the bears are wrong.
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tomorrow, kick off the trading day with "squawk on the street." live from post nine at the nyse. not a lot of things, land mines. >> it all starts at 9:00 a.m. eastern. ♪
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optionsxpress by charles schwab. it is time -- it is time for the "lightning round" on cramer's "mad money." rapid-fire calls, you say the name of the stock, i tell you whether to buy or sell. are you ready, skedaddy? it's time for the "lightning round" on cramer's "mad money." david in california. david? >> caller: hey, jim, how you doing? >> real good. how about you? >> i work for a company called wso, i wanted to know what the long-term would be. >> oh, man, i love watsco. this is like the quintessential american stock right now that is going to work -- and you also -- well, it's the yields, not so much, but hvac, hvac is one of
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the strongest currents right now in the action. all right, let's go to lois in florida. lois? >> caller: merry christmas, jim, to you and all my fellow cramericans. >> thank you. >> caller: i bought in at 77 on marin when it was supposed to go up. >> i remain a buy as i do celgene, gilead, regeneron, steve? >> caller: boo-yah. my stock is fedex, ftx, what do you think of it? >> i prefer u.p.s. to fedex. tom in connecticut, tom? >> caller: international group holdings, eigi. >> do not know it. do not know endurance. do not know it. let's go to john in new jersey,
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john? >> caller: mr. jim cramer. >> what's happening? hit me. >> caller: dgo -- >> no, no, no, no -- >> sell, sell, sell -- >> you want a gold stock, you've got to go to rand gold. i prefer the gld, understand that gold is not going up right now but we can stay long it as a hedge. it's a currency. jay in new york, jay? >> caller: manhattan boo-yah. >> nice. brooklyn boo-yah back at you. what's up? >> caller: guidance. i need guidance on a stock you seem to like, sirius xm satellite. >> analysts were lukewarm on the last quarter. i think you should buy it. i like sirius. and i particularly like -- i like that guys running that company -- i think they're very good. you want to be long sirius satellite. and that, ladies and gentlemen, is the conclusion of the "lightning round." >> the "lightning round" is sponsored by td mure trade. ameritrade. in real time.
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in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. yep. got all the cozies. [ grandma ] with new fedex one rate, i could fill a box and ship it for one flat rate. so i knit until it was full. you'd be crazy not to. is that nana? [ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. [ male announcer ] fedex one rate. so i can reach ally bank 24/7, but there ar24/7.branches? i'm sorry, i'm just really reluctant to try new things. really?
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what's wrong with trying new things? look! mommy's new vacuum! (cat screech) you feel that in your muscles? i do... drink water. it's a long story. well, not having branches let's us give you great rates and service. i'd like that. a new way to bank. a better way to save. ally bank. your money needs an ally. pretty much everywhere you shop these days, they ask you if you want to join the loyalty program. these things have been crucial in modern retail. giving retailers a new way to
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connect with customers. how can you play this loyalty card explosion? how about with alliance data systems, ads, behind a host of customer loyalty programs as well as data-driven marketing services and private label retail credit card programs like you'll find in a lot of mall-based retailers. this stock has been on a tremendous run. it's up 70% for 2013. up 254% over the last three years, talk about a stealth bull market. company's latest quarter was terrific. and even up here, still only trades 24 times next year's earnings. let's check in with ed heffernan, learn more about his company. welcome to "mad money." >> thank you. >> have a seat. okay. i know two companies located in plano and one is big and failing or at least looks failing, which is jc penney, and then there's another one, it's yours and i was embarrassed to know -- i'll admit, how little i really knew about how all of us have touched your company in one way or another without knowing. >> right. we're pretty much behind the scenes.
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we put our clients first. and then we're all the stuff making the watch work. >> explain to me how you could have 100 million customers as varied as merck, ford, fedex, dell. are there commonalities of all of those that you do? >> sure. and this is one of the big macro trends going on is that more and more companies out there are looking to learn about their own customers. and in order to do so, one of the best tools out there is to put together a loyalty program. by having a loyalty program, i'm able to then understand what you're buying, when you're buying, how you're buying, what motivates you to buy. and our job is to then figure out what can excite you to come back one extra time this quarter, two extra times this year. and if i do my job right, the roi on those types of investments are huge.
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>> whose ideas -- are you implementing or also coaching these clients? >> it's a combination of both. so you're talking about these massive, massive programs, everything from the city bank thank you network, rewards, to a number of programs like victoria's secret and ann taylor like you mentioned. it's a combination of us providing a platform and also providing the ability to extract that deep skew transactional information that's so important. >> because of your retail and because you say in your most recent conference call that you are very optimistic of things, but you're doing twice as well as a lot of your competitors. where do you feel right now about the holiday season? >> actually, what we saw in the holiday season goes against a little bit of what you're seeing out there in the marketplace, what you're hearing about. what we saw for our clients was a pretty strong -- >> okay. >> -- five-day period. and, you know, which would suggest to me that this is going to be a pretty decent holiday
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season. >> could that be because you also say omni channel, a relationship with paypal. you have a lot of channels not talked about in the media. >> right. and our clients, you're not talking about these huge big box retailers. you're talking about retailers such as pottery barn, ann taylor, victoria's secret, names like that did quite well. whether it's bricks, whether it's online, whether it's through catalog. the multi-channel approach actually looked quite strong over the holiday. >> i think you have a better handle on it than the media. what do you think they say? they say why doesn't he split the stock? well, it's a great question. and i guess it's a little one of my pet peeves. we started, we went public in '01 at $12. and it's been a nice run at $250 or so. but from my perspective, splitting the stock doesn't add
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incremental value. it's basic old school and that's the way i am. >> but what does add incremental value is the slingshot. strong growth in business combined with share count takedown. >> right. yeah. we're looking at our model is such that if you look at where the dollars are going in this industry of big data, digital marketing, all that stuff out there, we're comfortable saying that we can grow organically our top line at approximately 3x gdp, and that combined with the fact our share count is shrinking 10% next year, you're going to see an acceleration. >> that seemed like the forerunner to facebook started by a bunch of kids at harvard business school. is that how it started? >> well, it goes back a long, long time. it's not one of these things that popped out. but it's now grown into a very,
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very large successful digital agency platform, loyalty platform, and most of the large loyalty programs are run by epsilon. >> you have some credit. for your credit card, you have that great mix of fees and finance charges. >> right. our view is we have a number of platforms that appeal to different verticals. so specialty retail, jewelry, home furnishings would be more likely to have a private label card because of the liquidity factor whereas a lot of the other verticals, like financial services and pharma and places like that would prefer big loyalty program from epsilon. at the end of the day, i don't care. >> right. >> and our goal is to extract the type of information that those clients need. so to your point earlier, we have information on roughly 230 million people and we have a beautiful view into their behavior which helps our clients immensely. >> well, and i want to thank
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you. wish i knew more about your company beforehand. you have a great business. >> this is great. >> thank you very much. the president and ceo of alliance data systems. a.d.s. and the website has everything, watch the videos too, you'll understand it. stay with cramer. [ male announcer ] here at optionsxpress, our clients really seem
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hey ray, my uncle wanted to say thanks for idea hub. o well tell him i said you're welcome. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. yea, and these ideas are across the board -- bullish, bearish and neutral. i think you need a bigger desk, pal. another one? traders love our trading patterns, now with options patterns. what's not to love? they see what others are trading -- like the day's top 10 options trades by volume -- and get ideas! yea i have an idea: how about trading that in for a salad? [ male announcer ] so come trade at the place that's all about options and futures. optionsxpress. open an account today and get a $150 amazon.com gift card when you call 1-888-330-3137 now. optionsxpress by charles schwab. at the top of the show, i told you why stocks are going
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up. today represents a stock bookcase of why so many go higher. it seems one off and you see the full mosaic and becomes thematic. these two companies are embl emblematic of a huge undercurrent at the moment. buying competitors to raise margins and game market share. and the acquisition is immediately accretive. this line extension from whitewave, makes it much more valuable to shareholders. positions them to become more like haines celestial and reminds us how companies build up heft in their industries have more bargaining power with suppliers and vendors. no wonder it rallied 5% today at all-time high. sysco shows us the power of deals to move the needle in a spectacular fashion. this stock's been stuck in the low 30s for ages. suddenly it burst out by buying u.s. foods, including stock, it's offering stock. nearly 10% gain at one point
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today a 30% gain at least in the early morning hours when the news broke. that's remarkable. at another time, i would fear antitrust regulation, but not with the trust department, the one that blessed the american airlines deal. it was a deal that started trading today and i think after initial disposal of stock by debt holders who don't know what to do with their stock winnings other than sell them, american will soar higher, too. mergers are behind the strength of micron, gaining another 3.5% today in part because it bought a failing japanese conglomerate that competed with them in the dram market. that's allowed the company's dram business to maintain price, a lack of capacity for the second line of business flash has kept pricing strong for that commodity, too. it has as both personal computers and cell phone sales have gotten a tad stronger here. an acquisition is behind the recent outperformance of linn energy, otherwise down market for oil and gas producers, linn
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is buying barry petroleum. and that will soon close allowing analysts to raise the numbers. and then there's celgene, revealing positive data that brings it still closer to being the first line treatment around the world. that puts the possibility of $17 of earnings power on the table as soon as perhaps 2015 which makes it an incredibly cheap stock even after the 2% run today. finally there's the refiners, a group that's been down and out not that long ago as the price of u.s. oil has come up so much that they weren't able to arbitrage the difference between cheap crude and expensive brent. refiners were able to buy crude, here or over there, refine it and sell the gasoline at the global price which was priced off of brent, the higher one. brought down domestic oil prices, that's good for the refiners, they can coin money, the brent prices sell much higher and sell it at the gas station for the same price. you don't know the difference. the price they're buying that crude is much lower. emblematic of a discerning
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market. oil stocks are headed down even as the refiners are headed higher. that's how it should be. rational reasons for stock rallies. just what's supposed to happen as we get the transition from the fed-assisted stock market to earnings. stay with cramer. over the next 40 years the united states population is going to grow by over 90 million people, and almost all that growth is going to be in cities. what's the healthiest and best way for them to grow so that they really become cauldrons of prosperity and cities of opportunity? what we have found is that if that family is moved into safe, clean affordable housing, places that have access to great school systems, access to jobs and multiple transportation modes
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i like to say there's always a bull market somewhere, and i promise to try to find it just for you right here on "mad money." i'm jim cramer and i'll see you tomorrow. it's another day of bad surprises from obama care. and this may be the topper. some people with pre-existing conditions, especially cancer patients, may be worse off because of the new law. and sticker shock. deductibles are skyrocketing and that means huge out-of-pocket posts. and then get this -- 70% of doctors in california won't play in obama care. also tonight, very senior, highly placed republican house source in washington, d.c. tells me the budget deal is close but the sequester will not survive

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